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TWENTY-YEAR FINANCING NEEDS <br />MWMC maintains a Capital Improvements Program (CIP) and a Capital Financing Plan in order <br />to facilitate short-term and long-term budgeting and rate making decisions. The revenue or fund <br />forecast projects revenues available from user rates, SDCs, interest earnings and other <br />miscellaneous income, and contains inflationary assumptions. The expenditure forecast is based <br />on projected Operating budgets, with inflationary assumptions, and Capital budgets based on the <br />2004 Facilities Plan 20-Year Project List and projected equipment replacement and major <br />rehabilitation needs. <br />A 5-year CIP is maintained and supports the long-range expenditure/revenue forecasting process. <br />The 5-year CIP includes projects identified in the 2004 Facilities Plan 20-Year Project List. <br />Projects remaining from the Facilities Master Plan (1997), the Biosolids Management Plan <br />(1998), and the Wet Weather Flow Management Plan (WWFMP) (2000), were included in the <br />2004 Plan). In addition, projects are included that extend the life of the RWF and/or help meet <br />new National Pollutant Discharge Elimination System (NPDES) permit requirements. The 5-year <br />CIP is based upon engineering cost estimates and identifies funding for each project. The 2004 <br />Facilities Plan 20-Year Project List contains budget level estimates of project costs (in 2004 <br />dollars) and approximate timing of projects. <br />Over the past several years, since grant and GO bond proceeds have been exhausted, MWMC <br />has met annual operating expenditure needs, including budgeted contributions to Capital <br />Reserves (which fund the majority of the CIP) through user rate revenues. From 1996 through <br />2003 these revenue requirements were met with only modest increases to user rates over time. <br />However, the combination of decreased per capita water consumption (through conservation <br />programs and improved plumbing fixtures) increased operating expenses at greater than <br />inflationary rates, and the estimated $144M - $160M (in 2004 dollars) in capital project costs <br />associated with the facilities plan 20 year project list, has led to the need for significant increases <br />in user rates. During the FY 04-OS budget development process, MWMC examined a number of <br />user rate alternatives. The approved funding alternative raised user rates by 24 percent <br />immediately with planned increases of 6 percent in fiscal years OS-06, 06-07, and 07-08. SDC's, <br />another source of revenue to support the Capital Improvement Program also have increased and <br />are currently anticipated to provide a portion of the funding for the projects in the 20-year project <br />list. <br />2005 MWMC Financial Plan Page 7 <br />